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Retailomania blog posted a presentation that predicts major upheaval in retail over the next decade. Just as many great old financial names disappeared in 2008, Magnus Ohlsson, founder of MORM, predicts many venerable retail names are about to go the way of Abercrombie and Fitch . . . before it came back as a used clothing store for kids.
Here are three critical points that apply to every business in every sector;
1. You don’t know who you competitors are. That’s because consumer behavior is replacing entire sectors. Newspapers and magazines have lost their relevance and their clout. Big box technology stores are disappearing. Email is where information goes to die. One-third of homes have eliminated their land line phones. Workers us Yammer to collaborate, which is why no one shows up at your meetings.
2. Size is no longer an advantage. Sure, size can sustain operations and give you a lot of places to cut, but it won’t build your future. As switching costs drop or go away, companies and people can afford to try tiny apps instead of massive systems. They can always go back. Security and quality mean “easily repaired or replaced,” not “never has a problem.”
3. Online and Social changes the consumer decision process. And there have never been so many channels of communication. Whether you’re customer is a shopper in a store, the CIO of General Motors, or the procurement group of a mid-size company, their decision processes are affected by Facebook, Twitter, texts, and Yelp. People expect important, relevant information to meet them in their context, not yours. If you make them come to your site or find your email, you might as well kiss them goodbye.
As recently as 2008, I told consumer loyalty clients that their competitors are not just the companies in their line, but Harry Potter and American Idol. That’s still true (if you update the references to The Avengers and Mad Men), but now people live differently. We expect everything important to come to our smart phones at precisely the right time and in the format we demand.
That’s asking a lot of large companies, which is why tiny start-ups pose threats never before imagined.
In short, your competition is not the other companies you go head to head with. Just as a golfer’s real opponents are the course and himself, your real competitors are the way you’re used to doing things and the the things you’re used to doing.
What do you think about me writing a movie screenplay? I think I will.
It’s a sequel to the 1998 hit You’ve Got Mail. You remember, don’t you? Meg Ryan and Tom Hanks?
Hanks is a senior exec for a big box bookstore chain called Fox Books. Fox is killing the mom and pop book shops. Fox Books locations are popping up everywhere. Hanks’ character is a ruthless, greedy businessman.
Ryan owns a idyllic little bookstore that she dotes on like a little girl with a new pet bunny. In the movie, their characters hate each other because Fox Books wants to put the Ryan’s shop out of business. Ryan’s character is a sweet, socially conscious champion of the little guy.
But there’s a twist. Hanks and Ryan, through their AOL screen names, are falling in love with other. Their online personas haven’t figured out each other’s real-life character. Fun for all.
Now to my sequel.
Jump ahead 13 years.
In the first act, we see Meg Ryan walking down a busy street, looking at her iPad, spilling her coffee (in a “Little Shop” paper cup that has an original crayon drawing by one of her little customers.)
Having made peace with the Fox company years before, without looking, she turns into the automatic double doors of Fox Books. The doors don’t open. Ryan crashed into the door. Coffee flies, her iPad falls.
As she bends over to pick up her the device, cut to tight shot of a man’s hand picking up the iPad for her. Their hands touch briefly over the shattered touchscreen.
Cut to wide view. Hanks, in a trench coat, rises with the broken iPad. Tighter angle again, they stare at each other. Meg’s mouth open.
“So,” he says to Meg. “Come by to dance on my grave?”
Meg’s shocked. “Huh? I mean, ‘no.’” She’s confused.
Cut to Hanks. “You had to have known. You read HuffPo, don’t you?” He points to a poster on the door.
Cut to poster:
CLOSED FOR FINAL INVENTORY
Don’t miss our Store Closing Sale starting November 12
70% to 90% off everything in the store
Books * Videos * Music
Fixtures * Equipment * Furniture
“I heard about the bankruptcy,” says Ryan. “But I figured it was just a restructuring. I . . . I’m sorry.”
Hanks looks into the dark windows of his once bustling store. “I’ll be alright.”
That’s right. The Little Shop Around the Corner (the name of Ryan’s shop in the movie) is surging because of skillful application of game science and location-based dynamics. She’s changed her business just a bit, expanding from kids only to book lovers in general. She’s added coffee and killer desserts, too.
But the big box bookstore is dying because of the Kindle—and ebooks in general.
Think it’s far-fetched? It’s not . It’s happening.
I wandered into my neighborhood Border’s Saturday. Day of one of its final two days in existence. I read a lot, and I got my first Kindle last Christmas.
I spent many hours in that Ballwin, Missouri store. In 2006, I blogged about it on my non-business blog, Hennessy’s View. Even though I love niche stores, like The Little Shop Around the Corner, I loved that Border’s, too. I loved being able to get just about any book I needed.
On Saturday, everything was 80 to 90 percent off. Then again, everything consisted of a few hundred books that nobody would want to read. Instead of row after row, section after section of books on every subject, there were a dozen shelving units scattered haphazardly around. Most of the store was roped off. The café was gone, gutted. Wires and pipes protruded from the walls and floor like rebar after a building collapse.
And it smelled of death, of vacancy, of fatigue. The way an apartment smells after you’ve removed your furniture but haven’t cleaned or painted.
I looked at the employees. They were no longer book lovers who happen to know how a POS system works. They were cashiers. The only floor assistance came from the Fixture Sales Manager whose job was to move the last of the shelving units. Huge magazine racks had been marked down from $250 to $12.50. And there they sat.
Border’s meteoric rise—a rise that inspired half the plot of You’ve Got Mail—owed to technology. In the 1970s, Louis Borders developed a software inventory system that gave his little family shop in Ann Arbor, Michigan, a decisive edge in that competitive field (source, In Nomine Domini).
And technology was also its downfall. Having expanded like a juggernaut in the 1990s and 2000s, the combination of Amazon and bn.com, followed by the Kindle and ebooks, destroyed Borders (source, Gather).
Like Sears in the 1960s and IBM in 1970s and 80s, everyone could see Borders’ fall coming. Everyone, that is, except its own executives.
As the internet and mobile rose, Borders E-team continued to add locations. When consumers began clamoring for experiences, meaning, and values, Borders removed the reading nooks to make room for more fixtures and inventory—fixtures and inventory that are now on sale well below cost.
As the economy recovers and values continue to shift from mass consumption to private experience, how many other titans will fall?
Beware the Good Times
In college, I wrote a well-received research paper on recessions and recoveries. I found that the most dangerous time for many big businesses is not the recession, but the time after. New businesses born of the privation of the recession and built by talented people who were cast aside in cost-cutting, change industries.
It seems that in post-recession booms, buyers—consumers and corporations—are not looking for the latest model of what was popular before the fall; they’re looking for things that weren’t even imagined before the fall. Trends emerge that couldn’t have been predicted.
In this environment, businesses that try to hang onto the past die quietly. Industries that once defined the age find their age is past. Business models that were once revered seem hopeless flawed.
We’re in just such a cycle.